Court: District Court, E.D. Michigan; August 10, 2015; Federal District Court
The court denied Plaintiff Tabatha Deming-Anderson's Emergency Motion to Stay Real Property Redemption Date. The case originated in Oakland County Circuit Court on April 8, 2015, and was removed to federal court by Defendants PNC Mortgage and Deutsche Bank on May 12, 2015. The mortgage for the property at 2980 Steeple Hill Rd., White Lake, Michigan, was assigned to Deutsche Bank in August 2011, with PNC as the loan servicer. Plaintiff defaulted on her mortgage in September 2010 and entered into a Loan Modification Agreement in July 2011, but defaulted again in December 2013. After failing to cure her default following a notice from PNC in January 2014, PNC initiated non-judicial foreclosure proceedings, publishing notice from July 2 to July 23, 2014, and scheduling a foreclosure sale for August 5, 2014.
Plaintiff claims she provided PNC with necessary documentation for mortgage assistance, but PNC requested additional documents, contributing to confusion. PNC received what it considered a complete application on July 21, 2014, and adjourned the foreclosure sale to evaluate it, ultimately denying the application on August 18, 2014. Despite PNC's claim that it had no obligation to review the application, Plaintiff argues that PNC failed to provide timely options for loan modification.
In September 2014, Plaintiff, with attorney Steven Ruza, applied for another modification but faced significant delays and unresponsiveness from PNC. PNC sent a denial letter for this application on October 16, 2014, and denied a subsequent application submitted in November 2014 on January 5, 2015. By January 30, 2015, Ruza was informed that Plaintiff's application had expired, and a new application would not be reviewed before a sheriff’s sale scheduled for February 10, 2015.
Plaintiff submitted a loan modification application on January 30, 2015, which PNC disputes having received. A sheriff's sale occurred on February 10, 2015, initiating a six-month redemption period that ends on August 10, 2015. Plaintiff seeks a stay of this redemption period, arguing that Michigan law allows courts to grant equitable relief if there is a clear showing of fraud or irregularity by the defendant. She restates allegations of fraud from her Complaint and notes that her initial attorney, Steven Ruza, was charged with multiple felonies and withdrew from the case, which she claims has hindered her position.
In response, Defendants argue that Plaintiff's request should be assessed under the standard for preliminary injunctions and contend she has not demonstrated a likelihood of success on the merits, nor established other necessary elements for injunctive relief, including irreparable harm. Plaintiff clarifies that she is seeking a stay, not an injunction, and acknowledges failing to meet the burden for injunctive relief but argues the standard for equitable relief differs.
Michigan courts permit an equitable extension of the redemption period in foreclosure cases. To succeed, the plaintiff must show fraud or irregularities in the foreclosure that prejudiced their interest in the property. The Michigan Supreme Court requires a strong case of fraud or irregularity to set aside a foreclosure sale, and the standards for such exceptions are stringent. Courts have not clearly defined what constitutes an ‘irregularity,’ but it must be significant enough to affect the foreclosure outcome. For instance, in Powers v. Bank of Am. N.A., the redemption period was extended due to serious questions about the plaintiffs’ mortgage default status. Prejudice is assessed based on whether the plaintiff would have been better positioned to preserve their property interest without the defendant’s statutory noncompliance.
A Michigan Appeals Court case cited in Kim indicated that a foreclosure sale occurring five days earlier than scheduled did not warrant being set aside, as the mortgagor did not attempt to redeem the property during the redemption period. The RESPA Plaintiff alleged fraud and irregularities in the foreclosure process of the Anderson Home but failed to provide supporting evidence. Although the Plaintiff claimed violations of 12 C.F.R. 1024.38(b)(2) regarding the failure to maintain compliance with HAMP guidelines, the court determined that the Plaintiff lacked a private right of action under this regulation, as affirmed by the Consumer Financial Protection Bureau's final rule. The Sixth Circuit has also confirmed that neither HAMP nor its enabling statute provides a federal right of action.
Regarding 12 C.F.R. 1024.41(c), Plaintiff alleged that Defendants did not evaluate her for loss mitigation options within thirty days or provide written notice of the options offered. The regulation specifies that if a complete application is received more than 37 days before a foreclosure sale, the servicer is required to evaluate the borrower for all options. However, PNC provided denial letters within the required timeframe after each of Plaintiff's applications, and for the July 2014 application, it was received less than 37 days before the foreclosure sale, absolving PNC of the obligation to review it.
The Plaintiff further asserted that Defendants violated 12 C.F.R. 1024.41(d) by failing to provide specific reasons for the denial of her loan modification applications. PNC's letters indicated the denial was due to the incomplete application not being submitted in time or the lack of required documents. The court found that PNC provided adequate explanations for the denials. Overall, Plaintiff did not demonstrate sufficient irregularities to support her claims.
Plaintiff asserts that Defendants violated 12 C.F.R. 1024.41(f)(2) by initiating foreclosure proceedings on August 5, 2014, December 30, 2014, and February 10, 2015, despite having received multiple complete loss mitigation applications from Plaintiff prior to these notices. Under 12 C.F.R. 1024.41(f)(1), a servicer may not commence foreclosure unless a borrower's mortgage is over 120 days delinquent, and if a complete loss mitigation application is submitted, they must notify the borrower of ineligibility before proceeding with foreclosure. Defendants argue that they first noticed the property for foreclosure on July 2, 2014, which was over 120 days after Plaintiff's alleged default in December 2013 and prior to receiving Plaintiff's application on July 21, 2014. Although PNC was not required to review the application due to its late submission, they did and found Plaintiff ineligible for modification.
Regarding negligence, Plaintiff claims Defendants had a duty to exercise reasonable care in evaluating her loan modification application under 12 C.F.R. 1024.38 and 1024.41. However, the regulations only reference “reasonable diligence” in obtaining documentation and do not establish a legal duty of care for evaluating applications. Under Michigan law, no legal duty exists between a lender and borrower, negating the basis for a negligence claim. Plaintiff has not provided legal authority or evidence to support her claims of negligence, including allegations of mishandling her documents.
On the issue of wrongful foreclosure, Plaintiff contends that Defendants failed to comply with MCL 600.3201 by not notifying her in writing of the foreclosure proceedings, failing to publish notice of the sale four times in the newspaper, and not calculating the due amount correctly as of the sheriff's sale date. MCL 600.3208 mandates that notice of foreclosure must be published for four consecutive weeks and posted on the premises, but it does not require separate written notification to the mortgagee about pending foreclosure proceedings.
Defendants provided evidence of proper notice for foreclosure, published from July 2 to July 23, 2014, and attached to the Property. Plaintiff failed to demonstrate any irregularity in the process. Regarding the calculation of amounts due at the sheriff's sale on February 10, 2015, the specific section of MCL 600.3201 relevant to the allegation remains unclear. Even if PNC miscalculated the due amounts, Plaintiff did not show that this affected her ability to redeem the property.
Plaintiff alleges that PNC breached the implied covenant of good faith and fair dealing by not offering mitigation options and misleading her about prequalification. However, Michigan law does not recognize a breach of this covenant as a cause of action, and the exception recognized by the Sixth Circuit does not apply to loan modifications.
On the fraud claim, Plaintiff only recited the elements of fraudulent misrepresentation without sufficient detail. She claimed that PNC made false statements intended to induce her not to defend the foreclosure, but failed to meet the particularity requirements under Federal Rule of Civil Procedure 9(b). Consequently, her claims for fraud were inadequately pled.
The Court ultimately denied Plaintiff's Emergency Motion to Stay Real Property Redemption Date.
